The government for the first time has allowed a public sector power generation company to import diesel to run its power plant bypassing the state-run Bangladesh Petroleum Corporation.
Earlier in 2012, the government started allowing private sector companies to directly import furnace oil only to run their power plants with significant fiscal incentives keeping the petroleum corporation out of the purview of the benefit.
State-run North-West Power Generation Company became the first government entity allowed to import diesel either on its own or through any private company to run its 225MW combined cycle power plant in Khulna.
The energy division issued a letter in this regard on Sunday in response to a power division request, said officials.
It would pave the way for the import of fuel oil by the state-run Bangladesh Power Development Board and other state-run power generation companies bypassing the petroleum corporation, they said.
North-West Power Generation Company, however, would not be entitled to the fiscal benefit enjoyed by the private sector power companies, the officials said, adding that the decision might ultimately encourage the power generation company, and other public sector power companies, to import fuel by private companies.
They also said that North-West was initially allowed to import 3.40 crore litre high speed diesel bypassing the petroleum corporation.
‘NWPGC sought the government approval to import diesel directly using private channels to reduce its cost of power generation as well as to ensure its uninterrupted operation,’ its chief engineer Zahid Ur Rashid told New Age on Tuesday.
He, however, said that they were not yet informed about the clearance.
The cost of power generation from the plant would be reduced to about Tk 10 per unit or kilowatt-hour from the existing cost of Tk 16 per unit if it imported diesel directly, power company officials said.
After severe criticism, the government on April 25 reduced the price of kerosene and diesel by only Tk 3, to Tk 65 per litre, and petrol and octane by Tk 10 per litre.
Earlier on April 1 the government lowered furnace oil price by Tk 18 per litre to Tk 42 to reduce down power generation costs.
With the reduced fuel prices, the government continues making huge profit as the prices in the international market was low, said officials.
In the financial year 2015-16, the petroleum corporation gave Tk 5,950 crore in duties and taxes and made a profit of approximately Tk 7,500 crore.
The price of Brent crude reached its peak at $117 per barrel in June 2014 and then started falling, reaching below $30 before it recently rebounded to approximately $50.
The government, however, allowed private sector to import furnace oil with fiscal incentives of tax waver and a nine per cent handling charge on the import, they said.
‘This has resulted in the supply of electricity from the private power plants at cheaper rates than that of public sector plants who are bound to buy fuel from the petroleum corporation at higher rates,’ a Power Development Board official said.
The situation offers the private power suppliers a windfall benefit as they are operating their plants at higher capacities taking priority over public sector suppliers, he said.